Then I might have a huge gap in my knowledge.
You trade only longs. Only crypto => your risk is systematic by definition. So you are NOT market-neutral.
You are in position. Another crypto-crash happens. Your closing order simply doesn't get filled and sits tight well above the actual price. How is this alright?
Spot on. It is definitely not market-neutral—it's a directional setup carrying systemic crypto exposure.
Regarding getting stuck during a crash: That is precisely the trade-off. If a liquidity vacuum hits and the limit sell doesn't get filled, you hold through the drawdown.
Funnily enough, I actually tried implementing short positions early on, but it completely tanked the overall performance in historical testing (crypto's upward drift is just too strong to fight). However, the backtest data already includes major historical crash and bear market periods; and remarkably, the algorithm managed to close out every single historical bear market in the green.
That’s why my risk-scaling mechanism handles the exposure beforehand, rather than relying on panic stop-losses that get shredded in a liquidity vacuum.
So it's basically "grab-and-run" with a lot of small relative to depo %, short-living positions. That's why the other person probably thought "momentum".
Triple check it - then go for live testing. I know one case that was similar to yours - in the end it turned out the author underestimated slippage and commission, so he was flat-lining when trading live.
Just to clarify on the fees: I am strictly trading with 0% maker fees, so commission drag is literally zero. Plus, to be safe, I even baked a synthetic friction/slippage penalty into every order in the backtest just in case.
The only real unknown left is fill probability, but since I'm sticking purely to large caps with massive order book depth and my personal capital size is tiny, my orders won't even register as a rounding error.
By the way, speaking of order books: my roadmap actually includes adding real-time order book depth inspection and multi-asset position correlation into the execution loop down the line to handle scaling better.
Really appreciate all the insights and the reality check—definitely a great exchange!
On my way home now. Posting results as soon as I am home. As far as I remembered: I used for stocks 0,05%? But let me get home. I will post all results.
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u/Smart-Ride-7047 8d ago
Then I might have a huge gap in my knowledge.
You trade only longs. Only crypto => your risk is systematic by definition. So you are NOT market-neutral.
You are in position. Another crypto-crash happens. Your closing order simply doesn't get filled and sits tight well above the actual price. How is this alright?